Efficiency and effectiveness. Are these words interchangeable, or do they have specific inference in the context of business?
Definition:
Efficiency. The ability to avoid wasting materials, energy, efforts, money and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully and without waste.
Effectiveness. When something is deemed effective, it means it has reached the intended or expected outcome.
Key Differences Between Efficiency and Effectiveness
1. The ability to produce maximum output with limited resources is known as efficiency. The level of the nearness of the actual result with the planned result is effectiveness.
2. Efficiency is ‘to do the things perfectly’ whilst effectiveness is ‘to do planned things exceptionally’.
3. Efficiency has a short run perspective. Conversely, the long run is the point of view of effectiveness.
4. Efficiency is yield-oriented, unlike effectiveness which is result oriented.
5. Efficiency is to be maintained at the time of strategy implementation, whereas strategy formulation requires effectiveness.
For your consideration:
Efficiency and effectiveness both have a prominent place in the business environment. Both must be maintained by the organisation because its success depends on them.
Efficiency has an introspective approach, i.e. it measures the performance of operations, processes, workers, cost, time etc. inside the organisation. It has a clear focus on reducing the expenditure or wastage, or eliminating unnecessary costs to achieve the output with a stated number of inputs.
Effectiveness has an extroverted approach that highlights the relationship of the business organisation, with customers and the rest of the world, to attain a competitive position in the market. It helps the organisation to judge the potency of the whole organisation by making strategies and choosing the best means for the attainment result.
By all means plan to work with ‘efficiency’ BUT remember the customer will be gauging how ‘effective’ your product or service was versus your original promises.
ISO 9001 and other business standards are focused on your ‘effectiveness’ meeting the requirements.